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Disney Wants Its Heroes Back

Disney wants to have its superhero cake and eat it, too.

Longtime Walt Disney(NYSE: DIS) investors may not be aware of the complex financial machinations behind the Marvel film production business. An intricate lattice of bank loans secured by superhero ownership rights and distribution contracts with multiple partners launched Marvel into the rarefied air where Disney picked the company up last December for $4 billion.

But with the House of Mouse at its back, Marvel doesn't really need any of that fancy stuff anymore. Disney and its Buena Vista operations are powerful distribution entities in their own right, and liquidity has never been a problem for Disney. It's high time to untangle Marvel from the old support system.

In that spirit, Disney just restructured the distribution deal with Viacom(NYSE: VIA) subsidiary Paramount Pictures. Paramount still gets to market and make available the upcoming Thor and Captain America films, and the first two Iron Man movies will remain under the Paramount imprint. But Disney will pay $115 million to Paramount in exchange for distribution rights to Iron Man 3 and The Avengers. Thanks to a pre-existing side contract, The Avengers will also be licensed to cable channel EPIX, which also makes the movie available as a Netflix(Nasdaq: NFLX)digital stream.

This way, Disney gets to retain the 8% distribution fee it was supposed to pay to Paramount for Avengers and Iron Man 3. The first two Tony Stark movies each earned more than $500 million in global box office receipts before you even account for TV rights, DVD sales, and other incidentals. I see no reason to believe that the third installment would do any worse, and the Avengers movie rests on the bankability of several of Marvel's most valuable characters.

For the time being, News Corp's (Nasdaq: NWSA) 20th Century Fox remains the producer and distributor of the X-Men franchise, and Sony(NYSE: SNE) is rebooting the Spider-Man saga under its Columbia Pictures umbrella. I wouldn't be surprised to see Disney buying back those contracts eventually, but the in-house production projects had to come first. Disney spent a lot of money on Marvel and should be determined to milk every possible penny out of the new assets. This is a good start.

Adding Disney to your watchlistis the next best thing to opening up your favorite comic book. Enjoy the plot twists! The cliffhangers! The larger-than-life characters!

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